Gold Punches Above $1300 Level

Gold is steady on Monday, as the metal has paused from Friday’s strong gains. Gold is trading at a spot price of $1295.42 an ounce in the North American session. On the release front, it’s a quiet start to the new trading week. The key event of the day, ISM Manufacturing PMI, posted a weak reading of 50.8 points, below the estimate.

Gold prices continue to move upwards. The metal surged 4.8% last week and briefly pushed above the $1300 level earlier on Monday. This marked the first time gold has traded above $1300 since mid-January. Gold has taken advantage of the Federal Reserve’s decision not to raise interest rates and also benefited from a soft US GDP release last week.

ISM Manufacturing PMI, a key gauge of manufacturing output, missed expectations. The index dipped to 50.8 points, shy of the estimate of 51.6 points. This reading just above the 50-point line points to near stagnation in the manufacturing sector. Last week, Core Durable Goods dropped 0.2%, well off the estimate of a 0.6% gain. This marked the fourth decline in five months. Durable Goods Orders was stronger at 0.8%, but also missed expectations, as the estimate stood at 1.9%. Also on Monday, Final Manufacturing PMI and Construction Prices also missed expectations, but ISM Manufacturing Prices easily beat the forecast. Manufacturing remains a sore spot, as the sector continues to lag behind the economy’s generally solid performance, as the global demand for US products has taken its toll.

The first quarter of 2016 has been marked by shaky global markets and a sharp drop in oil prices, so slower growth for the US economy was not unexpected. GDP climbed 0.5% in the first quarter, shy of the estimate of 0.7%. This was considerably lower than the 1.4% gain in the fourth quarter of 2015, and marked the weakest quarter of growth in two years. Although economic growth remains moderate, the lukewarm reading will not help the cause of Fed policymakers who favor a rate hike, especially with inflation at low levels. The markets, which were not expecting an April hike, are keeping a close eye on key numbers, looking for clues as to whether the Fed will make a move at its June policy meeting. The April policy statement sounded cautiously optimistic about the US economy, but did not provide any clues about a hike in June.

XAU/USD Fundamentals

Monday (May 2)

9:45 US Final Manufacturing PMI. Estimate 51.0. Actual 50.8

10:00 ISM Manufacturing PMI. Estimate 51.6 points. Actual 50.8

10:00 US Construction Spending. Estimate 0.5%. Actual 0.3%

10:00 ISM Manufacturing Prices. Estimate 51.0. Actual 59.0

Tentative – US Loan Officer Survey

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Monday, May 2, 2016

XAU/USD May 2 at 11:20 EDT

Open: 1294.90 Low: 1288.73 High: 1303.79 Close: 1295.42

XAU/USD Technical

S3

S2

S1

R1

R2

R3

1232

1255

1279

1303

1324

1345

There is resistance at 1303

1279 is providing support

Current range: 1279 to 1303

Further levels in both directions:

Below: 1279, 1255 and 1232

Above: 1303, 1324, 1345

OANDA’s Open Positions Ratio

XAU/USD ratio is close to an even split between long and short positions. This is indicative of a lack of trader bias as to what direction XAU/USD will take next.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.

MarketPulse is a forex, commodities, and global indices analysis, and forex news site providing timely and accurate information on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.

Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.

OANDA (Canada) Corporation ULC accounts are available to anyone with a Canadian bank account. OANDA (Canada) Corporation ULC is regulated by the Investment Industry Regulatory Organization of Canada (IIROC), which includes IIROC's online advisor check database (IIROC AdvisorReport), and customer accounts are protected by the Canadian Investor Protection Fund within specified limits. A brochure describing the nature and limits of coverage is available upon request or at www.cipf.ca.

OANDA Europe Limited is a company registered in England number 7110087 limited by shares with its registered office at Tower 42, Floor 9a, 25 Old Broad St, London EC2N 1HQ and is authorised and regulated by the Financial Conduct Authority, No: 542574.

OANDA Asia Pacific Pte Ltd (Co. Reg. No 200704926K) holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore and is also licenced by the International Enterprise Singapore.

OANDA Australia Pty Ltd is regulated by the Australian Securities and Investments Commission ASIC (ABN 26 152 088 349, AFSL No. 412981) and provides and is the issuer of the products and/or services on this website. It's important for you to consider the current Financial Service Guide (FSG), Product Disclosure Statement ('PDS'), Account Terms and any other relevant OANDA documents before making any financial investment decisions. These documents can be found here.